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The Finn Review - Issue 12

Interview with Brumbys Managing Director, Michael Sherlock

Michael Sherlock is passionate about business. He's been with Brumbys for 28 years and in that time he's experienced most of what franchising and business could throw at him. Brumbys are now a listed company and he heads up a wide network of more than 300 retail bakeries.

So where to from here? With new baking technology comes new opportunity and Michael Sherlock reckons he's on a winner with his new concept called 'Brumbys Go'.

Len Ferguson spoke with him recently.

LF: Hi Michael. We always like to start by asking how many stores Brumbys has and how do you see things going in the future?
MS: Well we've recently passed the milestone of our 30th birthday and when you've been around for a while and have a lot of stores, exact numbers can be hard to put a finger on. At the moment there are about 318. So far this financial year we've opened 18 and there are 6 more in the pipeline.

LF: What are your goals for the Brumbys brand?
MS: We work on a five-year plan, so that gives us a roadmap for the business. We're aiming for around 400 stores across Australia and New Zealand. We don't have any company-owned stores so if we want to open stores we have to get a site and a franchisee. And you've got to bring those two together. The more times you try it at some stage you're going to end up with a site and no franchisee, but we don't do company-owned stores.

LF: So in that case, do you drop the site altogether?
MS: In such cases we either drop the site or pay the rent until we can get a franchisee.

LF: We talk to a lot of franchisors and it seems one of their main problems is getting good quality franchisees. Your brand is now quite mature - do you find this is a problem for you?
MS: Of course. It's a matter of getting the right franchisees in the right place at the right time. We do have three basic guidelines for our franchisees. 1. They have to be solely dedicated - we don't want them owning another business and thinking they can do this part-time. 2. They have to have a certain amount of equity to invest - we don't want them to be too highly geared. 3. We like them to live within a 20-minute drive from their site. As it's a seven-day-a-week business they often have to go back and forth.

LF: You've been around a while now, what are some of the things you would look back and do differently now in hindsight?
MS: When we were at the crossroads in 1991, we made some decisions. A lot of those decisions were short-terms decisions that have taken us a long time to correct.

LF: What do you mean by 'at the crossroads'?
MS: Back then the internal Brumbys franchise advisory council put together a consortium to buy the company from the receivers. The parent company of Brumbys was in receivership - but Brumbys wasn't - so we put together a franchisee buyout which was pretty revolutionary at the time. We then cut the guts out of the structure saying to ouselves 'we as franchisees know what we are doing'. We then said we didn't want as much help from head office so 'let's cut the fees down and we'll look after advertising ourselves'. So back then we took some structure out of the business that we've now put back in and it has slowed down the potential growth that we could have had.

LF: Tell us about your new concept 'Brumbys Go'?
MS: It's all based on new technology. We stood back and said 'if we started again with what's available now - how would we go about it?' We wanted to have less skill so you don't have to have a baker on-site. We wanted to have less space so we got that down from 60sqm to 30sqm. The unique thing is that Brumbys Go stores only sell snack items - no loaves of bread to take home - everything comes into the store frozen. We'll bring in frozen dough and then defrost it and work it, scrolled and rollled etc. You can't do that with loaves of bread. However, if you're making up a Cheddermite Scroll you just add the cheese and the vegemite and away you go! The Brumbys Go model is built around a new breed of oven that has huge technological advantages over normal ovens. Essentially it takes the bakers skill out of the equation. It's all pre-programmed so you simply press a button to cook. It's all about less skill, less equipment, and therefore less capital required for the franchisee.

LF: So where to now with Brumbys Go?
MS: We've just opened in the foodcourt in Doncaster in Melbourne and we've got three CBD sites - two in Brisbane and one in Melbourne.

LF: Can a new prospective franchisee take on a Brumbys Go store or do they have to start with a traditional Brumbys bakery/retail store?
MS: At this stage we are only offering this new concept to existing franchisees. I believe that before we start offering it outside our network we need to prove it over a longer period of time. We have to be careful to not get ahead of ourselves.

LF: From your experience over the years, what advice would you like to share with new franchisors?
MS: One of the things that I know is that as a start-up franchisor it's very hard to make money. It sounds glamerous but because the overhead of your support structure such as local marketing, branding, purchasing, technical support, IT support, accounting, admin and operations support - it can be difficult to manage. We call it the Ying and Yang - you have to ensure growth and compliance at the same time. You have to provide that entire infrastructure - which is a huge overhead. You've got to be able to run the show off the 6% or the 8% or whatever.

LF: Finally Michael, who do you admire most in franchising in Australia and why?
MS: I would say a gentleman by the name of Howard Bell. He's now in his late seventies and I would say he is the father of franchising in this country. When we first wanted to franchise we went to see Howard and he drew up our first franchise agreement. At that time, franchising was only in petrol stations and real estate. KFC and McDonalds were only starting to come here. Only last year Howard stepped back from full-time work. I still keep in close contact with him and he has a networking group in Melbourne that I'm a member of. He's made a significant contribution to franchising.